Signs of exhaustion after the recent rally is clearly visible, with the broader market unable to match the gains of the benchmark indices in
the last couple of sessions. Though the key indices rose to a 10-month high on Wednesday, caution seems to be setting in amid a feeling that the recent rally may be stretched.
Fund managers said the expectations from the government's upcoming Budget is high, giving very little room for any disappointments from this event. "It is very illogical the way the market is rising," said Shinsei Investments CIO N Sethuram. "We're not expecting the government to come out with any big-bang Budget announcements; we're likely to see some rise in social sector spending," he said.
Investors are expecting a Budget with pro-business policies and any deviation from expectations could spell doom for the markets, especially when stocks are factoring in even part of the 2011-12 estimated earnings. Analysts said Indian equities are among the most expensive among emerging markets, even after factoring in the growth prospects. "Stocks are fairly valued as of now. We expect a 10-15% market correction over a short-term period," Mr Sethuram added.
On Wednesday, BSE's 30-share Sensex closed at 15466.81, up 339.81 points, or 2.25%. NSE's 50-share Nifty ended at 4655.25, up 104.3 points, or 2.29%. In the broader market, losers beat gainers 1553: 1218 on BSE, an indication that investor sentiment in general is cautious. Brokers said investors are going slow on their aggressive purchases in mid- and small-cap stocks and are booking profits in ones that have risen roughly 80-100% in the last three months.
According to technical analysts, the market is overbought on short-term technical parameters, but do not expect a significant correction before the Budget. The Nifty is expected to find immediate support at around 4385, the level from which the index rebounded on Tuesday.
The unabated buying by foreign institutions even at these levels has surprised market participants. After buying shares worth Rs 955 crore on Tuesday, these investors net bought Indian shares worth Rs 738.09 on Wednesday, according to provisional sales data. Domestic institutions, who have been sellers in the last few sessions, net bought shares worth Rs 589.88 crore.
Fund managers said the expectations from the government's upcoming Budget is high, giving very little room for any disappointments from this event. "It is very illogical the way the market is rising," said Shinsei Investments CIO N Sethuram. "We're not expecting the government to come out with any big-bang Budget announcements; we're likely to see some rise in social sector spending," he said.
Investors are expecting a Budget with pro-business policies and any deviation from expectations could spell doom for the markets, especially when stocks are factoring in even part of the 2011-12 estimated earnings. Analysts said Indian equities are among the most expensive among emerging markets, even after factoring in the growth prospects. "Stocks are fairly valued as of now. We expect a 10-15% market correction over a short-term period," Mr Sethuram added.
On Wednesday, BSE's 30-share Sensex closed at 15466.81, up 339.81 points, or 2.25%. NSE's 50-share Nifty ended at 4655.25, up 104.3 points, or 2.29%. In the broader market, losers beat gainers 1553: 1218 on BSE, an indication that investor sentiment in general is cautious. Brokers said investors are going slow on their aggressive purchases in mid- and small-cap stocks and are booking profits in ones that have risen roughly 80-100% in the last three months.
According to technical analysts, the market is overbought on short-term technical parameters, but do not expect a significant correction before the Budget. The Nifty is expected to find immediate support at around 4385, the level from which the index rebounded on Tuesday.
The unabated buying by foreign institutions even at these levels has surprised market participants. After buying shares worth Rs 955 crore on Tuesday, these investors net bought Indian shares worth Rs 738.09 on Wednesday, according to provisional sales data. Domestic institutions, who have been sellers in the last few sessions, net bought shares worth Rs 589.88 crore.
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